In Roku’s case, management predicts that its 2019 losses will come in around $86 million on around $1 billion of revenues. The important thing, however, for tech companies is not to burn so much cash as to end up having to take on heavy debt or dilute their stocks to keep their operations rolling. Yet their share prices still increased as their growing revenues made up for their low profitability. Remember that Netflix and many of its peers were unprofitable or only marginally EPS positive for many years.
Roku Is Getting Close To Break-even: By evaluating Roku’s earnings, we can see that things are looking up for the company. Based on price-sales ratio, Roku’s valuation look reasonable and maybe even a touch cheap. For what it’s worth, NFLX stock’s P/S ratio is 9.9, while that of ROKU has dipped back to 8.5. Only at the very top end of that range would Roku stock potentially look too expensive. Due to the huge swings in Roku Inc stock as of late, the P/S ratio has swung between 5 and 11. Traditionally, for fast-growing tech companies with strong prospects, a P/S ratio of ten is generally considered fair. But it’s not a be-all and end-all analysis.
Bloomberg’s assertion that Roku Inc stock is expensive due to its high EV/EBITDA ratio is a fair point. The Pros of Roku Stockīased On Sales, Roku Inc Stock Is Not So Expensive: Based on any one metric, it’s easy to make young companies look expensive. Now, if ROKU reports good news, any short squeeze of Roku stock will be much weaker. This indicates that most short sellers took profits without driving Roku Inc stock back up. As a result, the short interest of Roku stock as a percentage of its float is down from 40% to 11.4% now. As Roku stock has fallen 20% in recent weeks, the those shorting ROKU have taken profits. However, those shorting Roku stock appear to have played their hand well. When so many shares of a stock are being sold short, the shares can soar relatively easily. At one point, short sellers had shorted 40% of Roku’s float That’s a tremendous number, among the highest you’ll see for a decent-sized NASDAQ company. Short Sellers Have Taken Profits: One of the big catalysts for the rally of Roku stock earlier this year was an aggressive short squeeze. ROKU is competing in a highly profitable field, but it is up against quality rivals.
ROKU STOCK PRO TV
Microsoft’s (NASDAQ: MSFT) XBox, Sony’s (NYSE: SNE) Playstation, and Apple’s (NASDAQ: AAPL) Apple TV are other products that are used by a meaningful number of consumers to access streaming-video content. Amazon’s (NASDAQ: AMZN) standalone TV offering is growing and pairs nicely with its Amazon Fire TV Stick, which is a direct competitor to Roku. In practice, though, there are a ton of cheap streaming-video offerings that cost far less than cable. In theory, there is a huge market for Roku’s offerings, such as its ad-supported channel, among cord cutters who want to save money.
ROKU STOCK PRO SOFTWARE
Heavy Competition: Roku’s pivot from selling hardware to hosting a software and viewing ecosystem comes with some major perks. So, based on this metric, it appears that Roku is generating relatively little income or cash flow at the moment. That doesn’t make Netflix cheap an EV/EBITDA of ten is considered normal, and Bloomberg reported that the current average EV/EBITDA ratio in the media industry is just nine. Roku stock is trading at an EV/EBITDA ratio of more than 500, whereas Netflix’s EV/EBITDA ratio is 47. Based on enterprise value/EBITDA, which is a popular metric for analyzing companies that do not yet have significant accounting profits, Roku stock looks exceptionally expensive. Is Roku Stock Even More Expensive Than Netflix? Bloomberg’s Lachapelle noted that, by one metric, Roku stock is even more expensive than Netflix (NASDAQ: NFLX). But that does raise a question: While Roku stock was cheap in November and expensive last month, what’s the right play on it today? The Cons of Roku Stock But shareholders can take some comfort in knowing that this was more a function of an overheated stock price than a sudden change in the TV-streamer’s business trajectory.” have taken a beating the last few days amid a string of analyst downgrades. Lachapelle wrote that: “Shares of Roku Inc. InvestorPlace - Stock Market News, Stock Advice & Trading Tips As she noted, the latest selloff is not a function of business performance, but rather extremely hot investor sentiment that had bid Roku stock up a tremendous amount over the past couple months. Tara Lachapelle of Bloomberg Opinion put it well.
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